Despite sharp fall in Q4 profit, analysts see up to 30% rise in Nykaa shares

Brokerage firms are upbeat on personal and beauty products omnichannel player FSN E-Commerce Ventures, which operates the brand, following the March quarter show even as profit nearly halved in Q4. They see up to 30 per cent rise in the stock.

The company reported a sharp fall in the bottomline, whereas the revenue and the gross merchandise value rose sharply during the period.

Results update
The listed e-commerce platform reported a 57 per cent fall in its consolidated profit at Rs 7.57 crore for the fourth quarter ended March 2022, mainly on account of new investments. It had registered a profit of Rs 17.9 crore in the same period a year ago.

However, the revenue from operations of Nykaa increased by 31.4 per cent to Rs 973.32 crore during the reported quarter, from Rs 740.52 crore in the year-ago period.

The gross merchandise value (GMV) in the beauty and personal care vertical grew by 29 per cent to Rs 1,248.5 crore in the March 2022 quarter from Rs 964.5 crore a year ago.

The fashion vertical recorded 84 per cent growth during the quarter to Rs 482.7 crore from Rs 262 crore earlier. The fashion vertical grew more than two-and-half times to Rs 1,751.6 crore in 2021-22, from Rs 653 crore in 2020-21.

For the year ended March 31, 2022, its consolidated profit declined by 33 per cent to Rs 41.28 crore, from Rs 61.64 crore in 2020-21. However, the annual revenue from operations increased by 54.61 per cent to Rs 3,773.93 crore.

Stock performance
On Monday, Nykaa shares rallied more than 5 per cent to Rs 1,425, before giving up the majority of gains to trade at Rs 1,388.15 at 10.55 am. The scrip had settled at Rs 1,351.80 on Friday.

Listed in November 2021, Nykaa has been one of the best performing startup stocks. Despite the route in the new-age companies, it never breached its issue price level of Rs 1,125.

Shares of Nykaa have zoomed about 130 per cent from its listing price to hit an all-time high of Rs 2,574. However, the counter is currently about 48 per cent below the highest levels.

Management commentary
“Despite market slowdown, our unique growth story continues, showing the resilience of our business model and long term sustainability by balancing strong revenue growth, responsible unit economics and profitability,” Falguni Nayar, CEO and MD, Nykaa.

The company has expanded addressable markets – speciality retail stores, Nykaa Man, and SuperStore. These businesses, along with our consumer brands portfolio have witnessed increasing momentum through the year, she added.

Brokerage Outlook
Brokerage firm

has maintained a ‘buy’ rating on Nykaa with a target price of Rs 1,730, signalling a 30 per cent rise in the counter. However, the brokerage has tweaked its estimates citing near-term risks.

“We believe Nykaa has made strategic investments in fulfilment capabilities, owned brands and brand recognition that will continue to bear fruit in the medium-term,” it added.

Another brokerage firm

had maintained a hold rating on the counter with a target price of Rs 1,351. It said that the company’s results were in line with expectations. eB2B business presents good long-term potential, it added

“The competition is likely to intensify from both vertical and horizontal peers. While we expect BPC revenues to grow, we believe Nykaa’s journey could be different – it will have to go more mainstream to drive this growth.”

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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